SPU SƏAnp a new customer who is willing to buy 5,000 additional Betas for a price of $82 per unit. What is the financial advantage disadvantage) of accepting the new customer's order?
SPU SƏAnp a new customer who is willing to buy 5,000 additional Betas for a price of $82 per unit. What is the financial advantage disadvantage) of accepting the new customer's order?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![### Required Information
**[The following information applies to the questions displayed below.]**
Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product. The average cost per unit for each product at this level of activity is given below:
| Cost Component | Alpha | Beta |
|---------------------------------------------|-------|-------|
| Direct materials | $42 | $24 |
| Direct labor | 42 | 32 |
| Variable manufacturing overhead | 26 | 34 |
| Traceable fixed manufacturing overhead | 34 | 37 |
| Variable selling expenses | 31 | 27 |
| Common fixed expenses | 34 | 29 |
| **Total cost per unit** | $209 | $173 |
*The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.*
4. Assume that Cane expects to produce and sell 109,000 Betas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 5,000 additional Betas for a price of $82 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Febfcfc0b-9f32-4e16-9143-aece98b8dc65%2Fbdddda49-80ae-4907-958d-c807168f8113%2Fm8j2exq.jpeg&w=3840&q=75)
Transcribed Image Text:### Required Information
**[The following information applies to the questions displayed below.]**
Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product. The average cost per unit for each product at this level of activity is given below:
| Cost Component | Alpha | Beta |
|---------------------------------------------|-------|-------|
| Direct materials | $42 | $24 |
| Direct labor | 42 | 32 |
| Variable manufacturing overhead | 26 | 34 |
| Traceable fixed manufacturing overhead | 34 | 37 |
| Variable selling expenses | 31 | 27 |
| Common fixed expenses | 34 | 29 |
| **Total cost per unit** | $209 | $173 |
*The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars.*
4. Assume that Cane expects to produce and sell 109,000 Betas during the current year. One of Cane's sales representatives has found a new customer who is willing to buy 5,000 additional Betas for a price of $82 per unit. What is the financial advantage (disadvantage) of accepting the new customer's order?
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